Meet Apple's Original Genius, Now JC Penney's Anointed Savior

JC Penney just nabbed Ron Johnson, senior vice president at Apple in charge of retail. Starting November 1, Johnson will serve as Penney's new chief executive officer, replacing Myron Ullman in a period of growth for America's third largest department-store chain. Unlike Johnson's former, futuristic employer, JC Penney is a 109-year-old company with a less than hip history. There's a host of speculation behind the curious staff change, not least in the market. But with JC Penney stocks surging nearly 20 percent after the announcement, it seems like the genius behind the hippest brand in retail has some believers.

Ron Johnson is the kind of guy everybody in retail wants to hire. His Stanford degree and Harvard MBA are attention-getting for sure, but the real attention-getter is his track record. It's nuts. After climbing the latter at Mervyn's, Johnson jumped over to Target when it acquired the California retail chain and climbed some more. During his 15 years there, Target got hip, went national, and crushed sales records. In 2000, Apple hired Johnson, who had risen to senior vice president of merchandising at Target, to fire up a retail division for only their products and accessories, a move that seemed foolish at a time when shoppers could buy discount electronics at Walmart or find variety at Circuit City. Today, Circuit City is out of business, Walmart is locked out of huge markets like New York City and Apple's retail operation is a $4 billion business.

The first Apple stores opened on May 15, 2001 in Tyson's Corner, Virginia and Glendale, California with an innovative layout that divided the store based on how customers used Apple products. Tucked in the back corner was the Genius Bar, an idea credited to Johnson who called the one-on-one interaction between certified Apple employees and consumers "the heart and soul" of the stores. It worked and within three years, one in five visitors came to the store for the Genius Bar but stayed to buy things. Look how excited Steve Jobs looks when giving a tour of the first Apple Store:

Apple opened retail stores in order to draw customers' attention away from the overwhelmingly dominant PC market and towards Macs. Today, the store on Fifth Avenue is the most-photographed location in New York City, and store openings abroad draw crowds that number in the thousands. Johnson always talked about the stores in superlatives, it seems to have worked. "I think the one thing that sets apart our stores and Apple, is fundamentally two types of people in the world, in my view. There are believers and there are skeptics," Johnson said at a design conference in 2004. "Apple is filled with believers. And believers tend to think of what can be, and they just go do it, and they don't spend time asking why not. They go and make it happen."

Johnson seems like he's taking a similar attitude to JC Penney. Or at least he'd better have--according to the math, he's actually paying for the privilege to run the company. Abandoning $50 million worth of restricted Apple stock for $50 million of restricted JC Penney stock, Johnson stands to lose if Apple continues its bullish run. JC Penney will pay Johnson a $1.5 million salary with $1.9 target incentive bonus, but Johnson is investing an additional $50 million--much of which came from Johnson's sold Apple shares--in 7.26 million shares of the company at $6.89 each, shares he can't cash in for six years. According to the terms of the deal, if JC Penney's stock price is below the $29.92 price it held when he was hired, Johnson stands to lose his $50 million. However, if Johnson manages to pull the price up, which he's already done with the news of his hire, he could earn over $385 million. Those who know him say that Johnson is willing to make the bet because he's always wanted to run a retail company.

Now, it's Johnson that sounds excited about the future. He said in a statement, "I've always dreamed of leading a major retail company as CEO, and I am thrilled to have the opportunity to help J. C. Penney re-imagine what I believe to be the single greatest opportunity in American retailing today, the Department Store."

As for that 20 percent surge in JC Penney's stock price? "Investors may be expecting too much," say Robert Cyran and Christopher Hughes in a New York Times column. "A little Apple marketing goes a long way."